22 April 2002 00:00 [Source: ICB Americas]Polycarbonate producers concede they are coming off a difficult year in 2001, but they expect a solid recovery, based on a strengthening global economy, the health of most of polycarbonate's end markets, and new products and technologies.
"Last year was a tough one for the plastics industry in general, and it was a bigger problem for polycarbonate because the tech recession was more profound that the overall recession," notes John Dineen, vice president and general manager of GE Plastics' global Lexan business. Mr. Dineen is "cautiously optimistic" and expects the market's high growth rates to resume, but he notes that polycarbonate has short business cycles that often surprise producers and analysts. Thus far in 2002, polycarbonate "is rebounding nicely," he says. In the first quarter, the company's daily order rates were more than 18 percent higher than during the first quarter of 2001.
Sander Van Veen, global product manager for polycarbonate, compounds and blends at Dow Chemical Company, points out that the plastic has "seen several years of phenomenal global growth." He calls 2001 "an aberration in that upward growth trend," as the market faced depressed demand in virtually every region of the world.
"Despite the current slowdown, long-term, we expect global demand to return to the same strong growth rates of 7 [percent] to 10 percent annually," Mr. Van Veen says. "Reduced demand throughout 2002, however, will likely cause operating rates to fall back somewhat from the industry highs of recent years. However, we anticipate demand growth will likely catch up with capacity once again. Dow is seeing a minimum of 6 [percent] to 7 percent annual growth in all geographic regions, and higher percentages in certain regions like Asia-Pacific."
Azita Owlia, vice president of consumer markets at Bayer Plastics, concurs that there was an overall slowdown in polycarbonate demand in 2001 because of a protracted economic slowdown in key markets, especially optical memory, information technology and automotives. Although Ms. Owlia says raw material costs were not an issue in 2001, producers are trying to raise prices to offset the recent run-up in those costs.
Ms. Owlia considers the market too complex to forecast, yet she too is optimistic. "When the economy does turn around, we expect to reach growth levels again of 8 percent," she says. Last year, "CD demand was down compared to 2000. DVD, though, has been very strong, and we see that continuing into 2002."
Other producers decline to comment on pricing, although they concede that last year's economic difficulties, coupled with a sizable upsurge in capacity in response to the market's rapid growth, are pressuring margins. "The polycarbonate market is faced with margin de-pressions to-ward unaccep-table levels, which do not support further investments," Dow's Mr. Van Veen cautions. "Delays on ex-pansions and an-nouncements on delays are a clear reflection of this market phenomenon. Further raw material price increases, without an increased demand, will force polycarbonate producers to increase prices."
Dow has a global polycarbonate capacity of 285,000 metric tons. The company has polycarbonate facilities in Freeport, Tex.; Stade, Germany; Nii-hama, Japan (Sumitomo Dow); and Yosu, South Korea (LG Dow Polycar-bonate Ltd.). Dow recently completed upgrades of the optical media-grade production trains at its polycarbonate plants in Stade, Germany, and Freeport, Tex. "Dow implemented several process and production improvements at the plant to enhance the performance of the resin in DVD technologies, as well as current CD and CD-ROM applications, including the addition of a new sub-micron filtration system for raw materials and polymer solution streams," Mr. Van Veen says.
Through the company's South Korean joint venture, LG Dow Polycarbonate, Dow added 65,000 metric tons of capacity in 2001. The company plans to add another 65,000 metric tons in 2004.
Ms. Owlia says Bayer plans to proceed with its previously announced expansion plans. Bayer's growth strategy includes five production centers for Makrolon polycarbonate throughout the world's major economic regions. The company will boost the capacity of its Baytown, Tex., plant to 350,000 tons. It will also increase its Map Ta Phut, Thailand, plant to 350,000 tons and boost its nameplate at Caojing Chemical Park, Shanghai, China, to 100,000 tons.
GE Plastics is building a second polycarbonate plant at its complex in Cartagena, Spain. That unit will have a capacity of 140,000 tons and be completed by the end of the year. Start-up will be based on market conditions. GE Plastics is also adding 165 million pounds at its plant in Burkville, Ala. That project, expected to cost $185 million, will be completed this year. In 2000, GE brought on a 30,000-ton polycarbonate unit in Rayong, Thailand, and another in Shanghai, China.
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